If inventory costs are declining, profit will be highest if the inventory method used is:
A) weighted average.
B) FIFO.
C) LIFO.
D) It is not possible to answer the question.

Question

Quizplus · Accepted Answer

When inventory costs are declining, the LIFO (Last-In, First-Out) inventory method will result in the highest profit. This is because LIFO assumes that the most recently purchased inventory is sold first, which means that the cost of goods sold will be higher in periods when inventory costs are declining. This will result in a lower net income and, therefore, a higher profit.

If Inventory Costs Are Declining, Profit Will Be Highest If